New analysis points to turbulence in the UK and European stock markets if Parliament votes down compromise withdrawal deal.

UK stock markets could fall by 25 per cent following a no-deal disorderly Brexit, according to research by MSCI, the global index-provider.

This stress-test has been applied to test the potential market impact ahead of the vote in Parliament tomorrow on the Prime Minster Brexit deal.

Its analysis suggests that if the vote is defeated and the UK leaves without an alternative deal, this could trigger a 10 per cent fall in European stock markets.

Thomas Verbraken of MSCI says: “Financial markets are increasingly edgy about prospects for the UK Parliament’s vote on a Brexit deal with the European Union.

“Rejection of the deal and a potentially difficult exit from the EU could have significant ramifications for the UK economy and financial markets, as two recent Bank of England (BoE) Brexit scenarios suggested.”

The MSCI analysis says while a “disorderly” Brexit could lead to substantial market falls.However the MSCI analysis has modelled alternatives for a ‘no deal’ Brexit.

While all suggest a significant slow down in the economy and a fall in equity markets – the results are less severe under a “disruptive Brexit”.

This scenario usesless severe assumptions, but still projects equity falls in the UK stock market of around 8 per cent.

This analysis shows that across the various scenarios modelled, the UK is likely to suffer more severe falls than European stock markets, or markets in the US or Japan.

Verbraken adds: “Our stress test analysis using MSCI’s RiskManager suggests that if Parliament rejects the compromise package and no deal is subsequently agreed upon, UK and European stocks could fall by nearly 25 per cent and 10 per cent respectively.”

He adds that the UK needs to be braced for impact if a deal on the UK’s withdrawals from Brexit cannot be agreed upon.